How Microgrids Unlock Savings in Oil and Gas

Key Takeaways:

• Microgrids can reduce diesel fuel consumption by 50% or more
• Systems like the R3Di® offer grid-quality power without interconnection delays—ideal for remote or critical oilfield operations.
• Energy-as-a-Service and power purchase agreements stabilize costs and reduce financial risk for capital-intensive projects.
• Participating in demand response and capacity markets turns energy infrastructure into revenue-generating assets.
• e2Companies' Virtual Utility® offers real-time ESG tracking and optimizes energy usage for compliance and savings.

Oil and gas companies are power-intensive by nature and increasingly power-dependent. 

From drilling rigs and well pads to compressor stations and refining assets, the industry relies on a mix of grid power and diesel generators to keep operations online. But with rising fuel costs, growing reliability concerns, and tightening emissions rules, many operators are rethinking their approach to energy supply.

Microgrids are emerging as a practical, profitable solution—especially for remote or grid-constrained locations. By blending existing generation assets with distributed energy resources (DERs), battery storage, and intelligent energy controls, oil and gas operators can reduce operational costs, improve power reliability, and meet sustainability requirements without compromising performance.

We’ll break down the true costs of traditional energy models in oil and gas, compare them to the savings potential of microgrids, and explore incentives and new revenue streams that make microgrids a smart business decision.

Why Diesel Alone Isn’t Cutting It

Traditionally, oil and gas facilities rely on diesel generators for backup and often as the primary source of power at remote locations, such as oil rigs. They are familiar and easy to deploy, but relying solely on diesel comes with significant costs, including: 

• High Fuel Costs
  Diesel is subject to volatile market prices and reaching remote locations can incur high transportation costs. At an average cost of $3.50 per gallon and a typical consumption rate of 0.07 gallons per kilowatt-hour (kWh), that adds up to $0.245 per kWh just for fuel. When generators run 24/7, even modest sites can face monthly fuel bills in the six-figure range.

• Maintenance and Operational Overhead
  Maintenance costs for diesel generators add $0.02 to $0.05 per kWh to the equation. Routine service such as oil and filter changes can’t be skipped without risking unplanned outages. And when outages happen, the cost is steep. Depending on the size of the operation, downtime can cost $100,000 per hour or more.
  
  
• Volatile Utility Costs
  Connecting a site to the public grid comes with its own set of costs and challenges. The average commercial electricity rate in the U.S. ranges from $0.11 to $0.15 per kWh, but many oil and gas operators also face variable peak demand charges of up to $0.20 per kWh during periods of high usage. For upstream and offshore operations, grid connection isn’t always an option, making onsite power essential. 
  
  
• Environmental and Compliance Costs
  Governments around the world are tightening CO2 emissions reporting requirements. For example, the European Union’s Corporate Sustainability Reporting Directive (CSRD) requires companies to report direct emissions (Scope 1), indirect emissions from purchased energy (Scope 2), and value chain emissions (Scope 3). Companies based elsewhere in the world that operate sites in the EU will also be impacted. Diesel-powered generators contribute to Scope 1 emissions, making it harder for oil and gas operators to meet emissions targets and potentially subjecting them to fines. In the U.S., emissions reporting requirements vary by state, but there’s an increasing move toward greater scrutiny.

Diesel powered generators might keep operations running for now, but the mounting impact of fuel expenses, maintenance, downtime risk, peak electricity charges, and emissions costs make them a costly and increasingly unsustainable strategy for long-term profitability.

How Microgrids Change the Equation

Many oil and gas companies are exploring alternatives to the diesel-only approach, including microgrids. Combining on-site distributed energy resources (DERs) such as solar panels with a battery energy storage system (BESS) and intelligent energy management, a microgrid system offers a smarter, more cost-effective solution. 

• Reduced Fuel Consumption
  When oil and gas operators supplement or replace diesel generators with renewables and stored energy, they can reduce diesel fuel consumption by 30–50% or more. With diesel costs typically $0.235 per kWh, this can save hundreds of thousands of dollars annually per site. 
  
  
• Lower Maintenance Costs
  Because microgrids cut down on the need for diesel, they reduce maintenance expenses for diesel generators. Fewer runtime hours mean fewer oil changes, reduced wear on mechanical parts, and fewer emergency repairs. Over time, this reduces both direct maintenance costs (typically $0.02–$0.05 per kWh) and the indirect costs tied to downtime and lost production.
  
  
• Avoiding Peak Demand Charges
  At grid-connected sites, microgrids with intelligent energy management can strategically use battery storage or on-site generation to avoid consuming power during expensive peak demand periods. With peak charges climbing as high as $0.20 per kWh, this can lower overall utility costs significantly.
  
  
• Predictable Costs with Flexible Financing
  Pairing a microgrid system with financing models like Energy-as-a-Service (EaaS), long-term Power Purchase Agreements (PPAs) or lease agreements can help stabilize energy costs. EaaS and PPAs convert variable, unpredictable energy expenses into a stable, predictable monthly payment, allowing oil and gas operators to reduce financial risk and plan more effectively for the future.
  
  
• Lower Emissions and Fewer Compliance Costs
  Reducing fuel consumption means reducing emissions. For operators increasingly subject to Scope 1 and Scope 2 reporting requirements under regulations like California’s SB 253 or the EU’s CSRD, reducing diesel reliance can directly lower their exposure to future penalties or stakeholder scrutiny.
  
  
• Operational Resilience
  Microgrids provide a critical layer of protection against outages from generator failures and unstable grid connections. With a steady flow of reliable power, operators can avoid costly shutdowns that could otherwise reach $100,000+ per hour in lost production.

Revenue and Incentives

Microgrids don’t just reduce costs; they can actively generate revenue and strengthen the business case for energy investment. Here’s how choosing a microgrid solution can become a strategic advantage for oil and gas operations.

• Demand Response Revenue
  Many utilities offer programs that pay facilities to reduce grid usage during periods of peak demand. Through demand response programs like these, operators can earn credits when they use stored or on-site generated power instead of relying on the grid in times when demand spikes. They will also avoid paying the typically higher costs of energy during peak demand times.
  
  
• Capacity Market Participation
  Microgrids may also qualify for capacity market programs, where grid operators pay facilities to provide power back to the grid during widespread outages, emergencies, or periods of system stress. Participating in a capacity market can turn your onsite microgrid system into a revenue-producing asset.
  
  
• Renewable Energy Certificates (RECs)
  When microgrids incorporate renewable energy sources, such as solar panels, operators can also earn Renewable Energy Certificates (RECs). These certificates can be sold to other organizations on voluntary or compliance markets, providing another source of revenue.
  
  
• Federal and State Incentives
  The Inflation Reduction Act (IRA) in the U.S. offers substantial Investment Tax Credits (ITCs) for renewable energy systems and battery storage through at least the end of 2025. Depending on the project configuration and location, companies can qualify for credits covering 30% to 50% of upfront costs. Some states also offer grants, rebates, or tax abatements to encourage distributed energy projects, especially in industries like oil and gas with significant energy demands.
  Learn more about eligibility and timelines for these tax credits. 

Future-Proofing Oil and Gas Operations with Smarter Energy Solutions

For oil and gas operators facing volatile energy costs, tightening emissions requirements, and increasing downtime risks, microgrids offer a powerful way forward. 

Microgrids reduce or eliminate dependence on diesel generators, help operators avoid peak charges, and can create new revenue streams. While the savings potential depends on cost variables such as location and available utility programs, adopting a microgrid now allows you to convert energy from a necessary expense into a profit-driving asset — and prepare for the future.

At e2 Companies, we’re committed to accelerating the transition to Grid 3.0, a vision for energy modernization that includes standardized intelligence, autonomous grid stability, and greater flexibility to meet demand. Our turnkey microgrid, the R3Di® System, provides a fully integrated microgrid with natural gas generation, battery storage, and intelligent controls. Together with Grove365™ and Virtual Utility®, these systems optimize energy use, automate energy management at your site, reduce emissions, and create pathways to monetize energy assets through demand response and grid services.

The financial benefits are substantial, with a potential net present value of over $7 million per site. 

This ROI reflects reduced operating costs, avoided emissions liabilities (including potential benefits under Social Cost of Carbon frameworks), and new revenue streams from participating in utility programs.

Microgrids also deliver societal ROI: improved reliability during outages, reduced carbon emissions, and enhanced operational resilience during grid failures. For oil and gas operators balancing profitability, compliance, and sustainability goals, R3Di® + Grove365™ and Virtual Utility® provide a comprehensive solution to meet all three.

Now is the time to move from reactive energy spending to a proactive energy strategy.

Estimate your costs and savings with Virtual Utility. Try our 2-minute savings calculator today.